Alabama Independent Contractors: What you need to know

Whether a worker is an “employee” or an “independent contractor” is critical when it comes to such important issues as pension eligibility, workers' compensation coverage, wage and hour law, and many other matters. In some situations, federal law will govern, but the question is most often resolved by looking to state law, particularly in areas such as unemployment tax liability, workers' compensation, and state wage and hour requirements.

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Unemployment compensation issues. Alabama law specifically applies the common-law rules when determining if an individual is an employee who is covered by unemployment compensation (AL Stat. Sec. 25-4-10).

Workers' compensation issues. An employer-employee relationship is a prerequisite for determining whether an individual is eligible for workers' compensation coverage. Special rules that are designed to protect employees apply to workers' compensation. In determining whether an individual is covered as an employee under the workers' compensation laws, the state will inquire not only whether the worker has the right of control but also whether the worker is a member of the class targeted for protection by these enactments. For example, someone working in the employer's plant and using the employer's equipment would be more likely to expect the employer to take the responsibility for accidental injuries and would have a greater chance of being considered an employee. On the other hand, a person engaged in repairing the employer's building and using his or her own ladders and scaffolds should probably be prepared to take on this responsibility, and this worker is likely to be classified accordingly.